100% mortgages possibly returning

[salto]

I was reading an article before which said Skipton Building Society are looking to bring back 100% mortgages. It’s currently awaiting approval but is thought to be designed to allow people who are currently renting and can evidence rental payments to buy a home without a deposit. It will be subject to strict criteria and good credit scores.

This would benefit so many if it happened, including us. We currently have a 5% deposit but getting to 10% will be hard considering how high house prices are at the moment. It’s also nice to think we could keep this deposit as a safety net or rainy day fund.

Other than the risk of negative equity what are you thoughts?

Exactly, we gave our daughter the deposit she needed to get on the housing ladder, she didn't save it. But she's paying a mortgage & all associated costs with home ownership now.

I got a 100% mortgage about 18 years ago. I've been very fortunate that I made a significant profit from selling approx 7/8 years later and that afforded me a big deposit for a house, which had a good interest rate because of the loan to value. For me I have no regrets, I couldn't have got on the ladder without it and now I'm in my forever home because of it.

Well yes - I am one of those home owners who has zero help from family and had to save hard whilst renting. What I am sayign is the view that paying a mortgage is like paying rent is a bit wrong as there does need to be spare money each month for other expenses.

I personally would not take the risk of a 100% mortgage.

I got a100% mortgage in 2003, sold house in 2007 and got three times what I paid for it!

We had a 105% mortgage from Northern Rock in 2005, we were really young with hardly any money and earned about £15K each. I think the whole house move including absolutely everything cost about £400, we were on interest only too. Our repayments were £490 which we thought was absolutely massive!

It did help us get on the property ladder though, we had a deficit of around £8K when we sold the property in 2014 (which PIL kindly paid off) and now have about £200K equity and a 'proper mortgage' one more move later.

I think if people approach it very very carefully it can be helpful to get people on the property ladder.

A 110% mortgage is a very different beast to a 100% mortgage. I am not I favour of the former, but the latter I am, with stricter lending conditions than 2007.

Yes, it will prop house prices up though. Which is not good for society, but neither is being stick in the rental trap

What other options do FTB have who don't have family money? You are very fortunate if you managed to save while paying rent, maybe you don't live in a very expensive place like London where average rent is £926 a month according to Spare room website - that's for a room by the way not a flat.

All the other options the government have introduced to help FTB have their own issues, none are perfect. Help to Buy and Shared Ownership had lots of flaws. I think 100% mortgages are a better option than them and FTBs are more likely to make money long term than on those schemes.

Exactly what I was coming to say!

Also for lots of renters the mortgage payments will be £100's less than their rent was each month so that money can then be used for maintenance etc.

Having a deposit proves nothing.

@Twiglets1 I lived and still live in London. I house shared until I was 31. That is how I mainly managed to save. I will say my partner bought a lot of our deposit to the party from money he had made selling a flat (which he bought himself with no family help).

It is hard an dgarder than ever, I am not dening that, but I have seen enough fall out from the previous days of 100% and 125% mortgages to be more than a little cautious.

Ok so you are luckier than many FTBs in that you not only have a partner but also one who had previously owned a property so was in a position to contribute a lot towards your deposit.

I don't think anyone on this thread is saying 125% mortgages are a good idea, the OP is asking for opinions about 100% mortgages.

A lot of people came unstuck with Northern Rock 100% mortgages and ended up losing their homes. It will also push house prices higher, so no it’s not a good idea.

We lost our Northern Rock 100 percent mortgage. It was all quite traumatising really. The market crashed and we lost 40k on our flat overnight.

@Twiglets1 I think both are bad ideas, but then I am fiscally quite conservative. I know had I risked a 100% mortgage in London in the mid 2000s I would probably be in a better place now financially. I know people who did it and it turned out well. Equally as @FrownedUpon says it did not work well for many.

The pushing house prices up objection is a reasonable one on a societal level. High house prices aren’t good for society.
However, they are good for the individual buying a property. Or at least home ownership is a better option for them than renting forever, which is the alternative, since rents are sky high.

You’re quite conservative which I’m not. But also, you had the option of being financially conservative since you were buying with someone with a big deposit. If you were a bit more desperate as had less money, you might have been drawn towards the 100% mortgages.

I’m not saying they are perfect and of course, there is always a risk with a mortgage especially if the loan to value rate is higher. But I do think there is a place for them in the mortgage market - with proper affordability checks done by the lender of course. For those renters who just can’t afford to save at the same time as paying high rents, and don’t have financial help from family/partners.

I live in a country where 100% mortgages are very common and the norm for first time buyers.
But stamp duty is quite high and paid on all properties so you have to save enough for that plus solicitor's fees.
Most mortgages are also fixed rate for the full term but can generally be renegociated if interest rates fall by a significant amount.

The housing market is pretty stable and young people are able to buy without having parents well off enough to help them.

Most mortgages are 15 to 20 years.

It all works well but the banks are really strict about how much they will lend in proportion to salary and the high stamp duty discourages people from seeing buying a flat or apartment as a momey making opportunity.

I'm for 100‰ mortgages but they are part of a package IMO. Not sure the UK has that package currently.

The other factors in the bad old days of Northern Rock 125% mortgages was self certification and interest only mortgages.

So not only could you borrow more than the value of your property, you could declare your earnings and have no concrete method of repaying the capital and they'd make no checks on affordability.

I read somewhere that someone had been granted an interest only mortgage for 10x his actual salary, so someone earning £20k could borrow £200k for example. Which would tick along nicely while he only had to pay the interest, but obviously no good if he wanted to continue living in the property at the end of the term but was unable to repay the capital and not willing or able to downsize pay it off that way.

DH and I had a mortgage with Northern Rock. It was a lifetime tracker for .10 above base rate. We have been notified twice when it was sold onwards. The latest one we are with is Landmark. The only thing that annoyed me was we kept getting calls asking if we wanted to move onto a fixed mortgage. This was when rates were 0.25 so we were only paying 0.35 so obviously no were staying as it is. Also calls telling us we were free to move lenders if we wished. Obviously trying to encourage us off the good 0.10 above base rate deal we were on. We make our final payment next month.

@Beachcomber Yes, it's higher income multiples and counting of both salaries that's allowed house prices to get out of control.

If people could only borrow two to three times a single salary for example, that would have reduced the increase in what people could pay, so prices wouldn't have increased so much.

Would also have given single buyers a better chance of buying on their own as they weren't competing against couples with two incomes and would have provided resiliance for couples as they don't rely on two salaries to pay the mortgage. So while it was seen as progress to also include a woman's salary when buying a house, it hasn't done any of us any favours. They could have just counted one salary when a couple was buying together, instead of both.

We told my son if he could save £10k into his LISA we would give him £50k so he could afford to buy a house. Where we live it is expensive and hard for single people to buy.

We had a very similar situation (daughter also single) although our daughter had saved 20k into a LISA. But she was living rent free at home so could afford to save whereas I’m not sure every FTB can. It’s very dependent on individual circumstances.
We topped the 20k up to give her a bigger deposit so she could get a better mortgage deal. Also buying in an expensive area.

That’s going back a long time. When my husband and I bought our first flat in 1988 we borrowed 3 times our joint salary.

I think I would prefer to be a mortgage prisoner than a rental prisoner. I have paid £145K in rental payments off someone elses mortgage over the past 8 years. The idea you need a deposit to prove you can afford a mortgage when most people now get help from family anyway is just a bizarre.

The fact I can demonstrate 8 years of monthly payments of £1500 on time every single month should be evidence enough I could afford a £1200 a month mortgage payment!

Absolutely

100% mortgages will likely push house prices up but they will help the millions of people stuck as renters.

If you can afford rent then you can afford a mortgage, and your mortgage will likely be cheaper anyway so you can save for repairs.

As long as affordability and debt checks are scrupulous then I can see no issue with this all. Many homeowners would have to take out a loan if they needed a new boiler/roof etc… Having a house doesn’t suddenly mean that you also have extensive funds for emergency repairs. Things like that happen over time.

We are up shit creek when the current generations start to retire while living in their privately rented properties.